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US CPI brings Relief, Will Fed Also?

The falling US CPI continued to fall yesterday and there were some positives and negatives within the details. The Mina increasing component that was Rent finally saw a decrease on a monthly basis. In the goods segment used car prices suddenly increased while new vehicle prices remain stable. In the energy segment piped gas continued to fall but gasoline prices saw a rise.

Thus, reading into details helps understand the relief might now be as defined as the headline suggests. This did not stop the Swap rate market to reduce the odds of a rate hike in June from 21% to 6%. It also resulted in US equities especially Nasdaq rising by 1% at the close.

Many investors and other stakeholders have already mentioned that even the tightening in the financial conditions due to the recent bank collapse would impact. And thankfully even Federal Reserve expects the same.

Going by the historical pattern of inflation, from May to July the monthly numbers remain stable or slightly up before the larger increase starts from August and September that lasts till November or December.

The main uncertainty will be the impact of such seasonality on the central bank's decision-making for the rest of the year. Also, will an anticipated Ukraine counter-offence spike the crude and energy prices before that?

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